Should You Buy or Rent?

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How to decide if it's time to buy a home

To buy or not to buy - the decision is a matter of finances and lifestyle, costs and conveniences. If you carefully weigh the pros and cons, you will find the answer that's right for you.


Ownership has its privileges...

Buying a home makes sense for several reasons. First, mortgage interest rates today are among the lowest in history. Second, you can build equity - the difference between the value of your home and the balance of your mortgage. You can borrow against that equity, which makes for a reliable source of emergency funding. What's more, you can do so at interest rates that are generally far lower than on any other form of consumer debt. And if you sell your home, you can collect your equity in cash, gaining liquidity.


...and its drawbacks

If you don't plan to live in your home for long, it may not be worth buying. Upfront fees, such as the realtor commission and legal fees, can cost you a pretty penny. Unless you plan to live in the home for at least three years, it's unlikely you will recover that cash through your home's appreciation. Meanwhile, the down payment you made comes as at opportunity cost, as it could have gone toward other investment opportunities. Home-maintenance fees are out-of-pocket. And you can now add property taxes to your list of regular expenses.


Rent right, or rent wrong

Renting has its allure as well. The money you would have spent on a down payment for a home can be invested elsewhere - a potentially profitable alternative. Also, there are no long-term commitments beyond the length of your lease when you rent, so you can relocate relatively easily and quickly. And forget about paying home-maintenance fees: landlords take care of your drafty windows and leaky faucets. On the downside, a rented home offers no equity - money goes out, nothing comes in. Even potential investment earnings are wasted on monthly rent payments.

Ultimately, make the decision to own or rent rationally, not emotionally. Maximize the investment considerations and weigh them against your short-term flexibility needs.